July 11, 2016 by Canadian Underwriter
CALGARY – Oilsands producers are not expected to be among the recipients of a record insurance payout arising from the wildfire in Fort McMurray, Alta., in May even though some of them had to halt production for weeks at a cost of millions of dollars.
Suncor Energy (TSX:SU) said Friday it doesn’t intend to claim an insurance payout despite losing more than three-quarters of its total oil production for about a month.
“My understanding is that business interruption policies typically require that asset damage be sustained and none of our assets were harmed by the fires,” said spokeswoman Sneh Seetal in an email. Suncor’s producing facilities were instead shut down due to evacuations or precautionary closings of pipelines.
Calgary financial analysts say none of the oilsands companies they report on are expected to file insurance claims for the same reasons.
Experts have estimated that 30 million barrels of oilsands production worth up to $1.6 billion was lost due to the fire.
The Insurance Bureau of Canada estimated Thursday that the wildfire caused about $3.58 billion in insurable damage, making it the costliest insured disaster in the country. About $1.25 billion of that is expected to be paid out through commercial insurance claims.
Lee Rogers, president of Calgary-based Rogers Insurance, said he thinks the insurance bureau’s estimate of wildfire damage is too low.
Rogers said his firm is the largest insurance broker in Fort McMurray and is dealing with thousands of claims adding up to “hundreds of millions of dollars” on behalf of the 100 or so insurance companies whose products he sells.
He said Friday he’s not surprised that the oilsands companies aren’t able to collect business interruption insurance because their policies are typically triggered at a much higher level of loss than similar insurance for small business.
Companies may only be eligible for business interruption coverage if they are down for a certain number of days, stopped by command of civil authority or if there’s physical damage, he said.
Rogers said direct damage from fire and smoke in Fort McMurray will likely account for most of the commercial claim estimate.
The wildfire forced the evacuation of almost 90,000 residents from the region. It destroyed about 1,800 houses as well as buildings containing 600 multi-family housing units, plus two hotels and a 665-room work camp.